Do California Employees Have to Offer Health Insurance?
Many people experience confusion about whether a California business is required under the Affordable Care Act (ACA) to provide health insurance coverage. What are the requirements? What size company must provide care? What exceptions are there? These are all questions our lawyers at Liljegren Law Group have fielded during their work, and we’re here to help you better understand this aspect of California law.
Determining the Company’s Size
The law determines the size of your company through a simple formula. It calculates this by counting the number full-time employees (30+ hours a week) and part-time employees separately. Part-time workers hours are added up, and every 30 hours worked counts as a full-time employee. This number is added to the total count of full-time workers. This means companies can’t just drop employee hours to reduce their size. Employers or owners also count as employees under the law.
Requirements for Coverage
Health insurance companies are required under California law to offer identical insurance plans for small companies as they do for larger ones. According to California state law AB1672, small businesses are eligible for coverage if they pay premiums, have existed for two months, offer coverage to all employees (full- and part-time), follow all insurance rules regarding contributions and participation by employees, and do not commit fraud.
California state law AB1652 also limits exclusions stemming from pre-existing conditions, sets specific rules for rates offered to small businesses, and makes sure certain policies are both issued and renewed.
Benefits for Businesses
All expenses incurred for health insurance are 100% tax-deductible from both state and federal laws. Business can help their employees save on taxes by contributing to their health coverage pre-tax, wherein they deduct the insurance premium before taxes are deducted. Businesses can also benefit from the ACA’s metallic coverage plans for employees, saving on some costs. At a minimum, the law requires that at least 50% of the plan costs be paid by the employer.
Small businesses, which often face difficulty qualifying for coverage, can now qualify by simply employing one non-owner employee for half of the previous calendar year or quarter.
Penalties for Non-Coverage
If a business fails to offer an employee ACA-compliant coverage, coverage that exceeds a set value of 60% of covered services, or coverage that is affordable (anything more than 9.66% of an employee’s paycheck). The Employer Shared Responsibility Payment penalty is levied monthly if the employee seeks coverage from the exchange or receives a subsidy to pay for coverage.
A potentially larger penalty is levied when an employee rejects the insurance plan, if the coverage offered fails to meet the minimum-value and affordability rules, and if the employee purchases a plan on the exchange or pays for the coverage with a subsidy.
Insurance laws can be complex, and often involve multiple layers of regulation that affect certain companies and employees differently based on several factors. Employees wondering if they are eligible for coverage by their employer would benefit from a consultation with a health coverage professional or an attorney.